Lawfare Daily: Ambassador Robert Lighthizer on Trade Policy

[Audio Excerpt]

\Robert Lighthizer

The reality is there is no free trade. Everyone is manipulating the market. Everyone is trying to get richer for themselves. That's why you have trade, quote, “negotiations.” You don't have trade giveaways.

Jack Goldsmith

It's the Lawfare Podcast. I'm Jack Goldsmith from Harvard Law School with Robert Lighthizer, the U.S. Trade Representative during the Trump administration.

Robert Lighthizer

It's very important that foreign policy, hard power guys in the national security realm spend more time thinking about economics. And it's not just whether you can make bombs, it's whether you can make semiconductors and whether you can make steel.

[Main Podcast]

Jack Goldsmith

Today we're talking about Ambassador Lighthizer's impactful views on trade policy that he explains in his book, “No Trade Is Free: Changing Course, Taking on China, and Helping America’s Workers.”

Ambassador Lighthizer, you've been involved with international trade since the 1970s, I think, as a private attorney on Capitol Hill, as Deputy U.S. Trade Representative under President Reagan, and then as U.S. Trade Representative under President Trump. And you have a very distinctive and influential view of trade and trade philosophy. But before we get to that, I'd like to start off with, if we could, in the Reagan administration, which was one of the surprising things that I learned in your book. If you could just tell us how free trade principles were viewed in the Reagan administration and what you think the significance of the administration was on this front, and what were the lessons you learned during that period?

Robert Lighthizer

That's an excellent question. There is this kind of perception out there that Ronald Reagan was a free trader. To some extent that perception comes from the way he spoke. He talked in those terms. But a lot of it is he's hijacked by free traders on the right. And they'll say that he was a free trader. And the reality is that one libertarian group, when he left office, said he was the most protectionist president since Hoover.

I would say the essence—remember it was a different world, right? You had the Soviet Union and now we have China as our principal adversary, not that Russia isn't a friend, obviously they're not a friend. So it was a kind of a different world. The Soviet Union was really not a trade or economic threat in any way, right. It was a tiny, tiny economy. I would say Ronald Reagan was basically an economic nationalist. If you look at what he did, he wanted to protect American interests. He had me go around and negotiate what were called voluntary trade agreements, but they weren't that damn voluntary. They were quotas basically that other countries had to agree to on carbon steel, on specialty steel. He put limitations on automobiles, which were a huge problem coming in. He did a whole variety of other things. He did some outreach. Another agreement, the first agreement I negotiated when I was quite young was to create a long-term grain agreement with the Soviet Union. You'll recall that the Carter administration, when Soviets invaded Afghanistan, stopped grain sale. So I started that at his direction in ’83.

But most of his actions in trade were to help America. And maybe the most significant if you look at the history, obviously it would be autos, would be one big one. But he had a whole semiconductor plan. If you think about how important semiconductors are to the world economy right now, we invented them. They were almost all made here. The Japanese had an industrial policy to basically take over that industry and did to a large extent before Taiwan and Korea did from them. He was an economic nationalist. And then in ‘85, of course he had Jim Baker, and they negotiated a revaluation of the dollar. So the big things he did were basically to save jobs for America, to save American industry. And I would say my philosophy is similar to his.

Now, the final thing I would say on this question is trade was not as big an issue to him as it was to President Trump, right? Because a lot more going on and Reagan was probably briefed on trade once a quarter and President Trump worried about it every single day. And part of that was because our situation had deteriorated, and part of it was because it was a cold war and some other things that Reagan was focused on.

Jack Goldsmith

And also a lot of things happened in the interim. That's where I want to go next. So things went in a quite sharply different direction in the 1990s. That's why I wanted to start with Reagan. Which is when, I take it, that the extreme free trade, eliminate tariff barriers, neoliberalism view took over. And it was the consequences of that you were responding to, I think, in the Trump administration. But before we get there, the obvious answer is the Cold War ended, but why did these principles take hold in the United States so firmly in the 1990s, including in the Republican Party, which hadn't really embraced them that robustly up till that point, I think.

Robert Lighthizer

It was a lot of things coming together. One, you could think of what happened in the ‘90s, which was a real change, right? It was NAFTA, it was the Uruguay War, WTO, China. China, we now we're like in 2000, but China in the WTO, but we gave them most favored nation treatment. So to some people would think of it as a kind of an evolution of the post-World War II view, right, when we were the only economy in the world, and we want to help rebuild Germany. We want to help rebuild Japan. So we had a certain economic view. So there was an element of continuity thought of in that way. I would say it was a break. There was also this hubris, as you say, that we had won the Cold War. A third element was you had a group in the Clinton administration that were very much this elitist, know it all, we're smarter than everyone kind of a group. And that kind of a group—and I say that as not a hater of Bill Clinton at all. I'm really not, I actually went to college a year behind him at Georgetown. So I knew him, and I never was a Clinton hater. But there was an element of that in that group.

Another thing I think that had happened, Professor, is that as you go on with a trade policy, and we had seven rounds of kind of trade barrier reductions, most of which were tariffs between the end of the Second World War and this period, you got to the point where there were no tariffs to reduce, and so they started reducing other things and doing other crazy stuff. And as that progresses, more big businesses become multinational. More of them become basically outsourcers. And so their political and economic power is put behind extending that direction. So it was a combination of hubris, kind of elitism, and political power and money that multinationals got out of going in a certain direction.

Jack Goldsmith

Your basic story in the book is that the multinationals benefited enormously from this regime. And so just to finish that thought, why did it seem to take broader hold in the Republican party? It couldn't have been just elites within the Clinton administration because it really was accepted more broadly than that.

Robert Lighthizer

Yes. If you would go back far enough, if you look at, let's talk about the Republican party, alright? So the Republican party was basically an anti-slavery party. Then when the civil war was over, it became a party of business, as you allude to. And they used tariffs and the like to build a business, to get manufacturing, also to some extent banking and the like. And that was the direction of the Republican party. But at a point the Republican party and conservative parties across the world tend to be agriculture parties also. And agriculture parties tend to be free trade parties. There is this odd thing in agricultural policy that they are generally very protectionist at home, but yet want to export. So you'll have dairy, and the like might want to be protectionist and soybeans—so agriculture parties in the United States and the agricultural sector tends to want free trade. And if you look at the deals that have been done, it's done relatively better than manufacturing in these. So the agricultural element is the Republican party is part of it. Part of it also is this sort of notion that tariffs and barriers are like taxes and that's government interference in the market and I'm a market person and therefore I don't like any of that stuff. That's kind of an element. I'm not infected with that disease, but that's another strain that you see.

So the Republican party has always been two parties, right? It's always been a mainstream worker kind of a party, and it's been a kind of a northeast Rockefeller party. And you could think of Rockefeller and Taft. You could think of Bush and Dole, right? There's a lot of ways you could think of this, but it's been a strain. And the elitist type, which doesn't really exist anymore, that part tended to be free trade. And then there was an influence in the other part, like the Dole or the populist part, that was influenced by agriculture. So for sure, the Republican Party had a free trade element in it.

And the Democratic Party was of two minds too. It was a worker party, and then it was a kind of an elitist party, a big business, a kind of a big thought party. And the big thought party tended to be free trade. So let me give you an example. If you were there in the ‘80s, and I said, who's the most liberal guy in the Senate? You'd say Ted Kennedy. Who's the most conservative guy in the Senate? You would say Jesse Helms. Jesse Helms was anti-free trade. Ted Kennedy was pro-free trade. You follow what I mean? That's the dichotomy that's going on all over the place. So there was a wild, crazy free trade element in the Democratic Party and one in the Republican Party.

And then there was a kind of a more sensible element in the Republican Party, like John Hines from Pennsylvania, very brilliant guy, died tragically. He would agree with me. And in the Democratic Party, you probably would have had, I'm trying to think of the best example. Certainly a guy like Russell Long would have agreed with me. But there are a lot of others like, Midwestern Democrats who would have said, no, I'm not in favor of that. And so it was a mix.

And what happened was that you ended up with Bush started a lot of this bad stuff.

Jack Goldsmith

The first Bush.

Robert Lighthizer

Walker Bush. Yeah. Bush 41. And then, so certainly NAFTA was started there. And then Clinton took NAFTA. The Uruguay round really started in Reagan, but it wasn't finished until Clinton. And then, and that kind of took over. And then the China stuff was another bipartisan thing. But if it wasn't for Clinton, it never, ever would have happened. I call that the trifecta of stupid, right? Those are the worst things and particularly the worst things for working people.

Jack Goldsmith

Okay, let's talk about that. So why were these important free trade innovations in the 1990s, basically early 2000s, why were they bad for workers? What is your basic view about why these things were bad and wrong?

Robert Lighthizer

So the question is, what is the objective of economic policy of which trade policy is a part of it? One option is it's price optimization. That's what you would get if you were an economist, price optimization. A certain group would say corporate profits. A certain group, economists again, would say efficiency in the marketplace. These would be the kind of things you would look at. In my objective, they're all wrong, and we have 30 years to prove them wrong. Although, some of us realized it earlier on. The objective should be that the vast majority of American workers have good, productive jobs, stay married, have kids, raise their family, stay off of drugs, go to Little League, and create communities. The group of all those communities, those thousands of communities in America is what makes us a great country. It's what makes us innovative. And so it makes our military strong.

So to me, we were focused on something that was not important or that was secondarily important. Certainly corporate profits and efficiency and price optimization are second tier things. The real objective is the life of the citizenry, life of communities. And we got off of that. We didn't. And if you go way back to the original economists, the Smiths and the Ricardos, these people would call them sort of social economists or political economists, right? And then we evolved to where economists said, no, we're more like physics. We're just going to look at this and do like physics. And they got out of the element about thinking about the consequences of what they were espousing.

So one way, just real quickly, one way to think of it is if your objective is consumption, then you have one approach. If your objective is production and productive people, then you have the approach that I espouse.

Jack Goldsmith

And you call this in the book the social component of work. And you say it's what's missing in the free trade regime. So I understand the steps in the argument, but could you flesh it out, what is it about the free trade regime, the lowering of prices, the obsession with efficiency that destroys the social component of work? What is the relationship there?

Robert Lighthizer

The notion that everybody should do what they do best and have no interference in the market is a nice utopian view. And it might work, I don't know, but certainly in a test tube, it might work. The reality is there is no free trade. Everyone is manipulating the market.

Everyone is trying to get richer for themselves. That's why you have trade, quote, “negotiations.” You don't have trade giveaways. So the United States, and some of the other Anglo-Saxon countries, were going down the direction of saying, we'll get rid of all of our barriers. And other countries weren't doing the same thing. So what was happening is you were outsourcing manufacturing, outsourcing technology, outsourcing your jobs, and really running up trade deficits. The net of which was we were selling our country for current consumption. And it is just fundamentally wrong. It has hurt people. There's no question. If you look at the country that that Angus Deaton Anne Case talk about, “Deaths of Despair” for sure. There’s suicides, alcoholism, drugs. Two-thirds of our country, two-thirds of our workers, do not have a college degree. Those people are poorer. They live seven years less. And if you look at the top, they live longer and have more and more wealth. So we're basically making our country less equal. And a huge component, a huge cause of that, is this notion that we want to get the cheapest television set, and that requires us to ship our television industry to China, say, for example. And until China comes up with their own industry and takes us on, some group of Americans will become wealthier because of that. But people will lose their job and losing those jobs is a higher cost than the value of the cheaper production, cheaper consumption.

Jack Goldsmith

So let me press you on that. So as I recall, the arguments from the 1990s, it was that the reduction in prices would make all consumers wealthier because they could purchase more with whatever amount of money they had. And it was understood then that it would come at the cost of destroying, I'm just being very simplistic, destroying manufacturing jobs by sending those abroad. But the argument was, A) that the wealth gains would outweigh the losses of the jobs and B), and I think this is what didn't happen, that B) there would be redistribution, that somehow or another those anticipated job losses would be that our society would redistribute the wealth or would have programs to ensure that those jobs were replaced in another way. And my understanding of this is that last component that didn't happen. Is that the right story?

Robert Lighthizer

In the various ways—so for me, I'm not a redistribution person. I don't think our objective should be to make some people get filthy rich, tax them, and take the money and give it to someone to sit at home and watch the cheap television. That's not the country I want.

Jack Goldsmith

I know that's not your philosophy. I didn't mean to suggest that it was. I'm suggesting that was the argument in the ‘90s. The argument was that, as I understand it, that everyone understood that we were going to lose manufacturing jobs. And the argument was that the people who lost those jobs—tell me if I'm wrong—the people who lost those jobs, somehow there would be new jobs for them or that the government would somehow intervene to make sure that the anticipated job losses would be compensated in some sense. Is that not what the argument was in the ‘90s?

Robert Lighthizer

No, I do not think that's—that may be what they thought in fancy Northeastern institutions in the economics department. But if you look at how the argument was made, Professor, go back and read the debate on China at PNTR, Permanent Normal Trade MFN. Go back and read the debate on the Uruguay Round. Go back and read the debate on that. It was the exact opposite of what you said. It was that, no, we're opening up new markets, we're going to have more manufacturing, we're going to have more exports and more jobs, and there are going to be better jobs.

Now, there were people who would say there'll be some redistribution. We'll have more people doing X instead of Y. And we're going to take a college educated guy who made steel very well and was a hardworking person. We're going to have him design computer chips for rocket ships. There were people who thought that or said they thought it. But of course it's absurd. They're all going to move to Silicon Valley and run Apple. That's what all these guys were going to do. That was the notion. It was a stupid notion. But if you look at how they sold those—every one of those things were sold. More exports, reduce the trade deficit, not increase the trade deficit, make America wealthier. Every single one of them. Read the debate. And by the way, they tended to pass, not in [inaudible], but the others tended to pass in a lame duck session after an election by a margin of where 10 votes would change the whole outcome of history.

Jack Goldsmith

Now, I agree that the argument was that America would be wealthier, but you're telling me that it wasn't even, a prominent argument was not that some large chunk of manufacturing jobs would be lost, that those jobs would be replaced because of the free trade regime, basically.

Robert Lighthizer

The argument was we would have more manufacturing, not that every job would be here, that there might be some redistribution within the—but we would have more manufacturing, more exports, become wealthier and have a lower trade deficit. Every single one of them did this. And it was stupid from the beginning. It never made any bloody sense. I called it out at the time. I said, this is just not true. It's not. And by the way, it was like predicting the sun's coming up tomorrow. It was wrong. And we have become poorer and have had all these social and cultural negative consequences also.

Jack Goldsmith

Okay let's zoom ahead to the Trump administration. President Trump enters office in 2017. You are confirmed as the Trade Representative. Tell us how you thought about fixing this problem and what you did.

Robert Lighthizer

So you have sort of two problems, alright? One problem is this issue of trade deficits, loss of manufacturing jobs, and deterioration of basic communities. The essence of America, right? That's one problem. The second problem is you have a challenge from an adversary, which is an existential threat to the United States and is doing everything it can to bring us down. And that's China. So you have two different elements to it, right? And then you go through and you have a series of issues that you have to deal with.

The first issue, we right away, we started 301 on China. We pick what we think is the smartest thing, that is to say, technology and forced technology transfer and spying and espionage and all this bad stuff they do. And President Trump directs me to use Section 301, one of our statutes, and to begin an investigation. And so that starts the China thing, right? Because we have to correct this problem. We have to realize that China is an adversary. And by the way, setting me aside for a second, there were people, H.R. McMaster and Matt Pottinger and Robert O'Brien and a whole bunch of other really good people in the security apparatus who were doing—and Wilbur Ross in the technology apparatus—who were doing the same thing in other areas.

But in my area, it was trade. We're transferring wealth to these people and they're taking our technology, and their objective is to replace us as number one in the world and to bring America down. That's my mindset, and I believe that to be true. And by the way, a lot of people didn't agree with me on that either at that time, and I've had scores, if not hundreds, come up to me and say, you were sure, we were sure wrong, right? And now in fairness, in convincing people, I got an assist from Xi Jinping, right, because he's more revealing than he was. But so that's one strain.

The other strain is, how do you bring manufacturing back? And not just manufacturing, the jobs that manufacturing spills out. How do you get the technology to stay in the United States? How do you make us richer? The way to distribute wealth in America is to have working people make more money and good jobs. That's the way I'd believe in distributing wealth. And we'd always done that, by the way, if you look at the ‘60s, ‘70s, compared to now, it's like night and day.

So those are the two things. So in the second one, the bigger the trade issue, generally we renegotiated an agreement with Korea. I'll just spend a second on the technology of that. The element of it, we, the agreement that had been negotiated in the Bush administration, which was another not good agreement. But it would have gotten rid of the tariff, which is 25 percent on small trucks in another year or two. And if you look at the auto industry, almost all the profit of American auto companies is made in small trucks. So it would have basically wiped out, the Koreans would have wiped out American companies. So we got that changed and a bunch of other things—agricultural, a bunch of other things— but that was a huge element. Then we took on NAFTA, which was another example of something that was going to hurt American industry and was hurting American industry. And we can talk about that. So we took that on, we negotiated for a year, and then we spent another year with Congress and ended up getting Republicans and Democrats to support that. We took on the WTO. We did negotiations with Japan; we did negotiations with Europe.

With this same theme in each negotiation, this theme being we have to rebalance. We've got to do something for our working people. And so you had these two strains running at the same time. And in the one, there were a lot of other significant players, as I say, in the national security sphere, Ross at Commerce, Mike Pompeo, there were a bunch of really good people who thought about this for the first time and said, these people are—I shouldn't say thought about it for the first time in a government context, the first administration, but this is an adversary. This is not like Switzerland. These people want to get rid of us. So those are the two things. And that was basically the plan from the beginning. And if you look back four years, that is what we did. We followed that plan more or less all the way through.

Jack Goldsmith

And when you started off at the beginning of the administration, as I recall, correct me if I'm wrong, this was highly controversial, these proposals. Both on the China front and on the terror front/manufacturing front, generally.

Robert Lighthizer

That's absolutely true. Absolutely.

Jack Goldsmith

As I recall, it was bipartisan concern. And, I'm going to jump to this later, but four years later, the world had changed, and it had come to your view. And I want to also talk later about the extent to which the Biden administration has embraced your view. But just going back to the 2017 to 2021 period, the U.S.-Mexico-Canada Agreement which replaced NAFTA, I remember how controversial it was when President Trump said he was going to rip up and renegotiate NAFTA. But you ended up doing that. And if you could just talk in a little bit of detail about what you changed in NAFTA and why. But I'm also especially interested in the politics, how you persuaded previously skeptical members of Congress that this was a good thing to do.

Robert Lighthizer

So USMCA is massively different than NAFTA. You can think of NAFTA as really two agreements, right? There's an agreement with Canada and there's an agreement with Mexico, right? We call it NAFTA, but at least until very recently, there was never a lot of trade between Mexico and Canada. It was Canada-U.S., Mexico-U.S. And it had gotten wildly out of balance. And it was going in a direction which was even worse and worse.

So for example, before we got there, nine of the previous 11 auto plants built in North America were built in Mexico. So we were losing this job, and it was a hemorrhage. And I come back to autos because autos, you could argue about technology being maybe the most important part of—real technology, not social media—maybe the most important part of the economy. But automobiles are very important because they move technology, they move steel, they’re high-paying jobs, they’re a source of data. They're just extremely important. If you look at trade deficits, massive trade deficits, it's very often autos that are moving, like Japan. Germany coming up, China, right? If you go around, autos are very important.

So we were losing our auto industry really to Mexico. And there were a lot of other problems too in the agriculture sector and other sectors. And then there were some things like investor state dispute settlement, which is this kind of an odd, I won't spend a lot of time on it, but it was very controversial. This is a sort of an odd thing that allows companies to sue governments in London with a bunch of arbitrators and overrule regulations. And it's, I think of it a little bit like us giving people political risk insurance to invest in Mexico, right? So I'm sitting here thinking, why am I paying you to invest in Mexico? Subsidize it. Why don't you just invest in the United States and get my guys, women, to get their jobs and buy your own damn political risk insurance if you want to invest in Mexico. So there were elements like that.

There were all kinds of technology changes we made. There was a very controversial thing. I say controversial because one business newspaper, which I won't name, was constantly, on a bi-weekly basis, attacking what we were doing. So another element, I say, listen, these things change. Technology changes. What could be stupider than a trade agreement being eternal? It's like the dumbest thing. We need certainty. No, you don't need certainty. So if you think about negotiating the agreement in the early ‘90s, when people don't even know what a cell phone is, and now you're going to say that applies to, that's going to guide where the jobs go in 30 years, is completely stupid.

So we put in a provision, we call it a sunset, which basically get a renegotiation in six years. Now a lot of these were evolved in various ways and they were extremely controversial. One of them, there were some people on Wall Street, you had to give them vapors every time they mentioned the name of a sunset, but it was just completely common sense. I would go to these business guys and say, which of you has eternal supply contracts? Just put up your hand because if you do, I'll back down. Of course, we're not that stupid, but we're supposed to be, right? I'm giving away the jobs of future Americans, when I have no idea what the economy looks like? This is stupid.

There were a whole lot of changes we went through in that. And it was an evolution. I remember my first meetings with business groups were very hostile, which bothered me exactly as much as you would expect it to bother me. I said, oh, thank God. I thought these people were going to like me. Maybe I am doing something right. And you brought along, you work with the people you work with. I had a great ally. Remember, this is all very long. This is a two-step process. One is to negotiate with Canada and Mexico, and it turned out to be Mexico first and then Canada, but we did it all together for a long time. So that's one-year long process, very intense, very closely followed politically and everywhere. And then the second one was a yearlong process to get it through Congress, because there is this thing called fast track. But if you read it closely, it's a farce. It says, here are the timeframes. And if you send it up, they have to act in this and vote and blah, blah, blah, blah, blah. And then you say, oh, but the speaker can just decide never to take it up. Oh yeah, that's right. Then it never goes. You got to get the speaker on board and the speaker's not going to get you a Democrat. And if she was a Republican, her predecessor, Paul Ryan, he wouldn't have agreed with it either. But Nancy Pelosi has to get her people on board, right? She's not going to just jam something down their throat to change the thing, even though I think she fundamentally agreed with what I was trying to do. And there was also this element of, is she helping President Trump? Because they all have Trump syndrome.

But anyway, we went through the process. I had a great ally in Rich Trumka, who was the head of the AFL CIO. Jim Hoffa, who was the head of the Teamsters. And then you had a lot of, I had advantages. I was very close to the Chairman of the Finance Committee, Orrin Hatch, who had been known for 40 years, Chuck Grassley, who literally, I was the Staff Director of the Senate Finance Committee when he got to the Senate. So he's been a close friend. So I had a lot of advantage. I knew a lot of these people. There was Rich Neal, there was Kevin Brady on the House side, the Ways and Means. So a lot of really good people that kind of came along and worked and we brought people along and we made compromises and did what we had to do during the negotiation and then the next step was the Congress. And the net of it was we got 90 percent of Democrats, 90 percent of Republicans. We got the labor unions who hadn't supported an agreement, since Lyndon Johnson was president.

Jack Goldsmith

I want to underscore how extraordinary this is. These are ideas that in January of 2017 were massively controversial. They were politically controversial while you were negotiating the agreement. They went contrary to what the conventional wisdom was on the benefits of free trade for the United States. And you did this, as you just hinted, you did this at a time when the Congress, a good chunk of the Congress despised President Trump and didn't want to have anything to do with promoting his programs. And yet by the end, you had 90 percent of the Congress in both parties. So I still, you gave a partial answer, but can you say more? What were the arguments that convinced people in that political environment to basically dramatically change their mind? That's what you did in Congress.

Robert Lighthizer

As cynical as people tend to be, and I'm among the most cynical, there are a lot of people in Congress who really want to help working people. And the reason I was in there was to help working people. This wasn't something that I was looking to do. I wasn't trying to become a government official or anything. I'd done that. I enjoyed it when I was in the Reagan administration, as you say. And I think a lot of them fundamentally realized that I was trying to do the right thing, that Trump policy was the right policy. They wanted this or that changed. We figured out a way to do it. A lot of the times, the changes they want were things that I wanted to, like making it easier to bring cases against labor violations in Mexico. I wanted that. And they helped me get more out of the Mexican—

The other thing is, I'll tell you Professor, I knew a lot of these people for a long time. I'd worked, I had an advantage in the administration in that I'd been Staff Director of the Finance committee when the penultimate grain trade round was done. I had experience with these people. They knew who I was and what I stood for and gave me the benefit of the doubt. And I have a lot in common with a number of the very liberal members, not on a lot of issues, but on the issues that I care about, they agree with me. Remember that the Democratic Party was, and in certain groups still is, a party of working people. Now the reality is it's probably overall not anymore. Now it's a party of a variety of things, environmental activism and technology and civil rights and anti-war. But at a time, it was the mainstream of the party.

Jack Goldsmith

Yep. I'm not sure how anti-war they are, but that's another topic. They used to be anti-war.

Robert Lighthizer

So what I meant to say is, an anti-war element in the party.

Jack Goldsmith

Yes, exactly.

Robert Lighthizer

But it's not the dominant by any means. But there is that group that still goes up there every Tuesday or whatever it is and protests in front of the White House because of the Vietnam War. So there's still those people in there, but you're right. It's not the group.

Jack Goldsmith

We're recording this on April 17^th, and I read this morning that President Biden was going to announce, is going to visit Pittsburgh, I think—you must've heard about this—to ask the U.S. Trade Representative to triple the existing tariff rate on Chinese steel and aluminum. And to some extent, this is obviously driven by election year politics, but it raises the question to what extent do you believe has the Biden administration basically adopted your philosophies on free trade, both in elements that you discussed, both vis a vis China, in terms of the national security issue and more broadly in terms of the bring manufacturing home issue?

Robert Lighthizer

So first let me talk about your thing. Raising tariffs on China, steel and the like and Biden is going to announce that and that's fine. Trump has already said he wanted to do that, right? So this is not like this is wow, oh my God. No one ever thought about that.  Trump simply said we need six percent tariffs on—so there's no question about that.

The other thing on this deal generally, and a lot of this stuff you have to remember, that if you raise the tariff on China and don't do anything anywhere else, then China sells to, X sells to us, right? In other words, it's not going to have—there are two elements. It will help us with our struggle with China. Yes, for sure. But it will not help us with our steel struggle with the world because steel is just going to come from someplace else, right? And it's like a balloon. You squeeze it, it's going to come out someplace else.

So while I certainly think it's the right thing, I think they made a mistake by getting rid of tariffs on a lot of other countries, which is hurting the steel industry. So that's a kind of a nuance on that.

But the bigger question you're saying that they have followed our policy. So I think it is true that they have not gotten rid of the China tariffs, for example. They've done a lot of other things that are pro-China. They got rid of the element that was negotiating espionage at the Justice Department. They've weakened the solar provision in a way that helps China dramatically. They haven't gone after circumvention. They haven't raised tariffs generally on China, which I certainly would have recommended to President Trump to do so. But having said that, yeah, they have not done that on China.

On the trade issue generally, there are people in this administration who agree with me, and I view them as smart, good people trying to do the right thing. The problem is that there are people in the administration who don't want to do any of those things. And the net of that has been not to do much, right? It's just the way Washington works.

Jack Goldsmith

So you don't really think—there's a view out there that the Biden administration has embraced the Trump administration's view on trade policy, and you don't believe that?

Robert Lighthizer

No, I do believe that. I think that if you look at Biden generally throughout his career, and I don't say this as an insult to Biden, but Biden was always a free trade type. He was for all this bad stuff that I consider bad. And he wasn't for it because he hated working people. The motivation was he was a foreign policy guy. And foreign policy guys are always on the wrong side of these issues because they worry about foreign policy and don't think as much about the effect on some guy in Asheville, Ohio, my hometown, and no longer has a job. You know what I mean? It's not that Biden's bad. It's that foreign policy people don't think about the economics, at least until recently.

So from where he was, I would say this administration is far, and some people in the administration are very good. I want to make that clear of endorsing what we did on USMCA. The China policy, the technology and China policy. So no, I think there is a continuity here. And massively different than any of those people would have been 10 years ago or a year ago. Massively different. And I'm grateful for that.  I think that they have not taken the next step and done the next things. And I think that the reason they haven't is more tension within the administration has deadlocked decision-making. And that's not a unique characteristic of the Biden administration, by the way. That's a unique characteristic of America, right? Every administration has these kinds of issues.  

Jack Goldsmith

So, many of our listeners are interested primarily in national security. And you gave a speech recently at the Naval War College, I think in the last year, about the relationship between trade policy and national security. And you've hinted at this already, but could you tell us your views on that?

Robert Lighthizer

Yes, I would be happy to. I think it is, and it feeds into what I was talking about, it's very important that foreign policy hard power guys in the national security realm spend more time thinking about economics. And it's not just whether you can make bombs, it's whether you can make semiconductors and whether you can make steel. So you have national security, there's a tendency for these people to think about economics as whether or not, McDonnell Douglas can build what they need to build to blow people up.

And the point I tried to make to these people is that's important, and we should talk about that, and I want to again, because I think the current administration and previous administrations, including Republicans, got it wrong. But let's, we'll talk about that for a second. But in addition to that, there's a far broader group of things and I would call them sort of defense adjacent items. And if you don't have defense adjacent industries, then when you gear up to go to war, you're going to lose. The person who can't make steel, the person who can't make semiconductors, the person who can't do all these other things that are necessary to get the soldiers there, to get the ships done. The best example, and I give it in that speech, is the tanks that won the Second World War in Europe were produced in auto factories, right? So you have to have this—anybody who's A hard power guy, a real national security woman has to think about this. We need a broader and giving that away for ephemeral kind of a foreign policy gains, and we've done that as a country, Republican never got, is a huge mistake.

Now, the second thing is I'm in favor of, you have to focus on China as the actual issue. They're the ones that are financing the war in the Middle East. They're financing the war in the Ukraine. They have approved both of them. They are both consistent with their policy. They're both training of ours. So I'm for something I call strategic decoupling. I want to get back to balanced trade. I want to get independent technology and I want to manage investment going back and forth. The current administration and some in my party will say, no, we want something called a small yard and a high fence. Alright. So we want to have just the really important stuff and have a high fence. You can't get through it. And the problem that one, we don't know what the hell a high fence is because we're relying on the technology that we've lost on to protect it. And the second thing is that the yard is infinitely bigger than these kinds of people think for the reason that I'm saying.

So let me give you an example. So this is just like completely nonpartisan. In the Bush administration, W Bush, they had a similar kind of a notion. Let's not worry about technology and trade and shifting our wealth to China, but let's be real careful about what we do with our technology. So one technology that was unprotected and they didn't care about was this little thing called EUV lithography. This is extreme ultraviolet lithography. So you basically can't make a bloody semiconductor without this technology. And you can't make an airplane without a semiconductor. You follow this through. So they let a company in Holland basically have access to that data and now all of that is made in Holland. And it was all developed, at least initially developed, in our national labs.

And the notion was that's not military. What do making semiconductors have to do with bombs? That's what guides the bombs, right? So you can't predict what is going to be crucial down the road. So what you need is a broader policy. And I think the current administration is fundamentally wrong. And a number in the Republican party are fundamentally wrong on this notion that you can continue basically business as usual with China, transferring hundreds of billions every year to them and not be in a collision course with destiny.

Jack Goldsmith

So my understanding is that the CHIPS Act, CHIPS and Science Act, I think it's called, is designed in part to address the very issues you're talking about, to bring some vital national security related manufacturing back to the United States. There's been some suggestions that it's working, but I don't know. How does the CHIPS Act fit into the issue you were just talking about?

Robert Lighthizer

So there's there are two kind of related issues. One is protecting our technology and Wilbur Ross was the first Secretary of Commerce and Gina Riamondo is now doing it also, but putting Chinese companies on the energy list and limiting what can be exported to them. And she gets a lot of credit. And so does Wilbur get a lot of credit for. So protecting that is a kind of an independent thing. The CHIPS Act, the notion is, and by the way, it passed a year or so ago, and we're just now starting to get the money out. It's enough to tear your hair out. When I gave that speech that you talked about in Newport, at that point, they hadn't given out a penny in the speech. The thing had been passed a year or so before, right? So there's a lot of criticism that is fair on that front.

But we have to subsidize semiconductors. And I was in favor of that act. Now, unfortunately, they gummed it up with a bunch of craziness that would drive some of your listeners crazy. They're worrying about daycare centers in factories instead of producing the technology to make lithography, right? There's all kind of craziness. It's a kind of a function of our legislative process. But the basic notion of subsidizing technology, and particularly in some of the areas, is something I completely endorse. Look at the Chinese are doing it, the Koreans are doing it, the Japanese are doing it, the Europeans are doing it. And the notion, which is popular among Republicans, that somehow all of our great industries grew out of hard work, sweat, and a government, and the government wasn't involved, and it was just good, strong people doing the right, that's all nonsense. It's complete nonsense. There's an element of our economy for which that's true, but do you think we'd have a railroad system if we hadn't given them all that land? Do you think we'd have the internet if we hadn't developed that in our Defense Department? The bloody glass that glows on the Apple phone is a result of our—you look at most big industries. I have to be careful. I tend to exaggerate like everyone.

But an awful lot of very big industries are the result of government money or protection at home. Period.

Jack Goldsmith

Last question. If President Trump wins the election in November and becomes president, what would you advise him that his top two or three trade policy items should be? What should his priorities be?

Robert Lighthizer

So the existential threat to America is China. So we have to start a policy of strategic decoupling, which I say is not no trade, but get back to balanced trade. Right now we're transferring, I'll just run through it quickly, maybe 300 billion to them in a trade deficit, maybe another 300 billion to them in stolen technology, maybe another 150 billion to them because of something called de minimis, a stupid law that lets them send things in small batches with no taxes and no duties and no data collection. And then another group of stuff that comes in through Vietnam and other places. And then finally an unknown number that comes in because they subsidize and encourage all the fentanyl that comes into the United States and kills a hundred thousand people. So it's coming in through Mexico, right? But it's China. So basically, you've got to take that on. And the first person that ever did that was Donald Trump. And we did it and we kept our tariffs, and we began the process, but it should have evolved now beyond that. And hopefully it will. So that's one element.

And then the second element is you have to worry about technology. You've got to make sure you win the technology battle. And that's a hugely important part of it. And things like the CHIPS Act, like Buy America are part of that. And then thirdly, you have got to get back to balanced trade. This notion that economists have that trade imbalances mean nothing is just fundamentally wrong. Trade deficits are basically a transfer of our wealth overseas for current consumption. And right now the United States has about 17 or 18 trillion dollars less in assets than other people own in the United States. And that's a very unhealthy thing and has all kinds of consequences going up and down the line. But basically, it's making the United States poor and all of our people poor.

So there's a in my front, in this international economic front, there's a whole lot of things that I would—but those are some of the principal ones. But the big thing is he said on True Social, if you want an idea, read the book and you read the book, so you know more than most people.

Jack Goldsmith

It's a very good book. And I congratulate you on that and on your extraordinary influence. Thank you so much.

Robert Lighthizer

Thank you, Professor. It's a pleasure to be here.

Jack Goldsmith

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